Earlier this month, the Kaufman Foundation published the Kauffman Index of Entrepreneurial Activity, its sixth such publication. When the Great Recession of 2008-2009 began, communities saw the impact of mass layoffs and soon realized that giving special attention (tax credits and other incentives) to large corporations can back fire. Since this realization, many communities around the United States have started various programs to support their existing businesses, specifically the small firms with high growth potential (also known as gazelle and high-impact companies in some circles).
Since the Kaufmann Foundation began tracking entrepreneurial activity in the United States in 1996, the index of new entrepreneurs declined until 2001 and has slowly climbed up to 0.34% (or 340 out of 100,000 adults start a business every month). The rate has climbed sharply since 2006 when it was a mere 0.29%.
In my opinion, the most dramatic statistic in the report is the percentage of immigrants who start a business in the United States. In 1996, 14 percent of all new entrepreneurs were immigrants – which was already a high number – but it increased to 29 percent in 2010. The figure below shows the rise of entrepreneurship among the immigrant population as compared to the native born population in the United States between 1996 and 2010.
Data from the Kaufmann Foundation also shows that entrepreneurial activity is generally higher in the Western and Southern states and lower in Midwestern and Northeastern states. Nevada and Georgia had the highest level of entrepreneurial activity with 510 per 100,000 adults creating a new business each month. West Virginia on the other hand had the lowest level of entrepreneurial activity with only 170 adults per 100,000 starting a new business each month.
The table below compares the states with the highest entrepreneurial activity with the states with the lowest activity in 2010.
According to the Kaufmann Foundation study, the entrepreneurial activity increased in the West in 2010, further widening the gap between the West and the other regions. According to their data, entrepreneurial activity in the West and the South has increased dramatically over the last 10 years, while the level of activity has actually declined in the Midwest and increased just marginally in the Northeast.
In terms of the 15 largest MSAs, Los Angeles-Long Beach-Santa Ana, CA has the highest level of entrepreneurial activity with 620 out of 100,000 adults starting a new business in a month followed by Houston-Baytown-Sugar Land, TX and Atlanta-Sandy Springs-Marietta, GA with 580 out of 100,000 adults. The lowest rates of entrepreneurial activity are seen in Philadelphia-Camden-Wilmington, PA-NJ-DE with 150 out of 100,000 adults starting a new business in a month followed by Seattle-Tacoma-Bellevue, WA with 220 out of 100,000 adults.
The reason the analysis from the Kaufmann Foundation is important is because more and more jobs are being created by small private companies. Small companies are becoming the engine of our economic growth. According to YourEconomy.org, a data driven website put together by the Edward Lowe Foundation, the percentage of people in the labor force in the United States who are self-employed or working in small companies (Stage 1 companies – with between 2 to 9 employees) has increased dramatically. Establishments with less than 10 employees now represent almost 40 percent of the total labor force in the country in 2008 compared with just 29 percent in 1992. On the other hand, the percentage of labor force working at large companies (with more than 500 employees) has decreased from 17.4 percent to 11.6 percent between 1992 and 2008. This goes to show the rising importance of supporting entrepreneurs and start-ups because they are the ones creating most of the jobs in the community now. 
According to the Kaufmann Foundation study, the entrepreneurial activity increased in the West in 2010, further widening the gap between the West and the other regions. According to their data, entrepreneurial activity in the West and the South has increased dramatically over the last 10 years, while the level of activity has actually declined in the Midwest and increased just marginally in the Northeast.
In terms of the 15 largest MSAs, Los Angeles-Long Beach-Santa Ana, CA has the highest level of entrepreneurial activity with 620 out of 100,000 adults starting a new business in a month followed by Houston-Baytown-Sugar Land, TX and Atlanta-Sandy Springs-Marietta, GA with 580 out of 100,000 adults. The lowest rates of entrepreneurial activity are seen in Philadelphia-Camden-Wilmington, PA-NJ-DE with 150 out of 100,000 adults starting a new business in a month followed by Seattle-Tacoma-Bellevue, WA with 220 out of 100,000 adults.
The reason the analysis from the Kaufmann Foundation is important is because more and more jobs are being created by small private companies. Small companies are becoming the engine of our economic growth. According to YourEconomy.org, a data driven website put together by the Edward Lowe Foundation, the percentage of people in the labor force in the United States who are self-employed or working in small companies (Stage 1 companies – with between 2 to 9 employees) has increased dramatically. Establishments with less than 10 employees now represent almost 40 percent of the total labor force in the country in 2008 compared with just 29 percent in 1992. On the other hand, the percentage of labor force working at large companies (with more than 500 employees) has decreased from 17.4 percent to 11.6 percent between 1992 and 2008. This goes to show the rising importance of supporting entrepreneurs and start-ups because they are the ones creating most of the jobs in the community now.
